News & Research

The first three charts compare STOXX equity indices with HY corporate BB credit spreads (inverted, 5Yr point of Qontigo Cluster Curves).

The chart shows the contribution to forecast variance from each group of factors in the Axioma Factor-based Fixed Income Risk Model, for a liquid USD investment grade benchmark, based on overlapping monthly factor returns.

Every significant relative gainer or loser reverted post peak of the crisis. This indicates that each significant sector deviation relative to the average of all corporates was an over-reaction.

Factor investing has long been a staple of quantitative equity portfolio management and has generated a great deal of interest on the Fixed Income side in recent years.

For STOXX USA 500 companies that issue bonds, the first half of 2020 looked remarkably different that the second half of 2019 through the lens of credit spread changes.

Corporate bond purchases by the Federal Reserve have led to both lower credit-risk premia and higher share prices, but leveraged companies have benefitted to only a limited degree so far.

Peripheral Eurozone issuers, such as Italy and Spain, saw their risk premia over German Bunds increase in the light of the extensive fiscal rescue packages required to deal with the fallout of the COVID-19 crisis.

BBB-rated corporate bonds yield more than AAA-rated ones to compensate for their lower credit quality.

The average 5y CDS basis, that is, the 5y CDS level minus the level of the 5y point on the bond curve, is in a significantly negative territory, which is unusual.

US mortgage and treasuries rates are at historic lows following the market’s reaction to the COVID-19 crisis and the Federal Reserve’s action to address this.

Corporate spreads have widened across the board since the start of the COVID 19 crisis.

The 3Month LIBOR-OIS spread has come back as rapidly as it widened. It is a measure of bank credit risk and liquidity of lending.